Key facts
- The mortgage reference interest rate is one of the most important bases for calculating rents and directly influences the permissible rent increases.
- Rental prices in Switzerland vary greatly depending on the region, with urban areas having significantly higher prices per square meter than rural areas.
- A rent freeze is being discussed in Switzerland, while in Germany there is already a limit on rent increases in certain regions.
Have you ever wondered how you can determine the rent? When renting out property, the question of how to set the rent is pretty much the first thing that comes up. In Switzerland, this issue is regulated quite clearly by the reference interest rate. Here you can find out what rental prices are like in Switzerland, what the maximum rent may be, how it is calculated and what rent increases are common.
What are rental prices and rents like in Switzerland?
Rental prices in Switzerland have risen continuously in recent years. In large cities such as Geneva and Zurich in particular, it is becoming increasingly difficult to find affordable housing. This is good news for landlords, as the high demand makes it possible to set higher rents.
However, there are considerable cantonal and regional differences. For example, the cantons of Zug, Geneva and Zurich are among the most expensive regions , with average rents of CHF 29, CHF 34 and CHF 27 per square meter respectively. In contrast, rents in the cantons of Jura (CHF 14), Neuchâtel (CHF 17) and Valais (CHF 19) are significantly lower.
These latest figures illustrate the considerable cantonal and regional differences in rental prices in Switzerland. While demand for housing is driving up prices in economically strong cantons such as Zug, Geneva and Zurich, rents in Jura, Neuchâtel and Valais are comparatively moderate.
The properti real estate price portal gives you an overview. To the real estate price portal
How can I determine the rent?
Rents in Switzerland are clearly regulated in the “Ordinance on the Rent and Lease of Residential and Commercial Premises”. Since September 2008, rents have been linked to the mortgage reference interest rate. This is calculated quarterly by the Federal Housing Office and corresponds to the average interest rate for real estate loans.
The maximum rent is largely based on this ordinance. Important: Since 2008, the reference interest rate has fallen from 3.5% to currently 1.75%. This means that the rental yield may not exceed this reference interest rate by more than 0.5%. A key basis for the calculation is the investment costs for the property, which are used to calculate the individual rental price with the help of the reference interest rate.
What is the rent index?
In Switzerland, there is a rent index, which is a list of rental prices. This document shows, among other things, how high the average rents are in a city or region. However, unlike in Germany, for example, the figures in the rent index are in no way legally binding, because in Switzerland the reference interest rate is always decisive for calculating the rent. This can rise on a monthly basis, with the annual reference rate being the most informative. Due to the fluctuating reference rate, your tenant may also demand additional payments.
What is the difference between the reference rate and the rent freeze?
One of the functions of the Swiss Ordinance on the Rent and Lease of Residential and Commercial Premises is to act as a rent brake. The quarterly adjustment of the reference interest rate ensures that rents are always linked to the current interest rate trend , thereby avoiding extreme price rises. Nevertheless, the scarce availability of living space, particularly in urban centers such as Zurich, Geneva and Basel, is leading to increased demand. This excess demand continues to drive up rents in these regions, as supply cannot keep pace with population growth and increased immigration.
In Germany, on the other hand, a rent cap has been introduced in regions with high demand and correspondingly high prices, which prohibits excessive rent increases. Switzerland is also discussing the introduction of such a price brake, whereby the rent may not be more than 10% above the local comparative rent.
The rent freeze is particularly relevant for new lettings. In Germany, it will initially apply for five years in order to ease the housing market. In Switzerland, rent brakes could provide relief, especially in cities such as Zurich, Geneva, Bern, Basel, Zug and Lausanne. However, the link to the reference interest rate already has a comparable effect on the tenancy by adjusting the development of rents to the capital market.
What rent increase is usual?
Rent increases are subject to strict rules in Switzerland, where tenant law is very strict. The following reasons allow landlords to increase the rent:
- Rising inflation
- Increased reference interest rate
- General increase in maintenance and operating costs
- Major conversions or renovations
- Adaptation to local and neighborhood standards
Tenants in Switzerland are generally very aware of their rights. You should therefore assume that tenants will seek extensive advice before accepting a rent increase. It is therefore all the more important that you can provide very good reasons for the rent increase.
In principle, the rent increase must not be unreasonable. Large jumps are not permitted and you must be able to prove exactly how you arrived at the new rent. In addition, the rule of thumb is that the rent may not be more than 0.5% above the reference interest rate.
How do I proceed with the rent increase?
There are various formal aspects to consider when increasing the rent. First of all, it is important to have good reasons for the adjustment. You should have the following documents to hand:
- For increase according to reference interest rate: Current mortgage reference interest rate for tenancies (according to the Federal Office)
- In the event of an increase due to additional work by the landlord: calculations on the proportion of the investment that increases in value, the life of the investment, maintenance costs and the current reference interest rate (mortgage reference interest rate)
- In the event of an increase due to cost increases by the landlord: If insurance premiums or administration costs rise, you must provide precise evidence of the cost increase; however, the percentage interest rate increase is not precisely specified in these cases
- In the event of an increase due to inflation: national consumer price index (you may increase the rent by a maximum of 40% of the increase in the national index to compensate for general inflation)
- In the event of an increase due to adaptation to local and neighborhood standards: at least five comparable properties (comparable location, size, furnishings, condition and construction period)
- In the event of an increase due to a targeted reasonable return: Only possible with a corresponding reservation in the rental reason or a property sale
You must inform the tenant of the adjustment to the interest rate in writing on the official form. You can obtain this from your canton. It is important that the tenant receives the notification at least ten days before the start of the ordinary notice period. The tenant has 30 days from receipt to contest the increase. If he does so, the arbitration authority will be informed and a hearing will be scheduled. An agreement outside the authority is also possible.
As you can see, determining and, in particular, increasing the rent is not a straightforward matter. Disputes with the tenant are a regular occurrence. For an effective request for an increase, it is best to seek legal advice from a lawyer or a landlord’s association.
All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.